According to virtually every major figure in Washington, it’s time to bring back critical supply chains—including those for medical supplies and medicine—to the United States. Republican Senators Marco Rubio (R-FL) and Josh Hawley (R-MO) have bills, as do Democratic Congressmen Marc Pocan (D-WI) and John Garamendi (D-CA). President Trump has called for reshoring medical production in the wake of the pandemic. “These stupid supply chains that are all over the world,” he said in May, “one little piece of the world goes bad, and the whole thing is messed up.”[1] “Trump Says He’ll Replenish Stockpile for Future Pandemics,” U.S. News & World Report(May 14, 2020).

Rubio emphasizes the threat from China, pointing to a threat in Chinese state-run news media to cut off pharmaceutical exports to the United States if America did not show more gratitude for China’s help during the pandemic. “If China banned exports,” said the article, “the United States will fall into the hell of a new coronavirus pneumonia epidemic.”[2] “Straightforward, the world should thank China,” Xinhua (March 4, 2020).This is not an empty threat; the vast majority of our imports of penicillin, tetraycline, surgical masks, rubber gloves, first aid kits, and liquid-filled thermometers come from China. Beijing does have the ability to induce shortages in America.

What policymakers ignore is that shortages in American hospitals are not new, and have not, until recently, been related to China. These shortages started in the late 1990s and accelerated in the mid-2000s. We’ve had shortages of hundreds of standard generic medicines for so long that the Food and Drug Administration (FDA) warned that young doctors increasingly do not know how to practice medicine with high standards of care; they just aren’t used to having the right medicines available.[3] “Drug Shortages: Root Causes and Potential Solutions,” U.S. Food & Drug Administration(FDA) (2019).

Focusing on the foreign threat ignores the real problem, of which Chinese dependence is merely a symptom. The United States’ underlying markets for medicine are broken. Shortages should produce higher prices, which should draw in more production. Yet as the FDA noted in a report last year, “Drug shortages persist because they do not appear to resolve according to the ‘textbook’ pattern of market response.”[4] “Drug Shortages: Root Causes and Potential Solutions,” U.S. Food & Drug Administration(FDA) (2019). Shortages don’t really result in higher prices, and so they don’t draw in more producers.

Markets are broken in medicine for the same reason that they are broken in much of the rest of the economy: the rise of monopolies has distorted price signals that used to match supply and demand. This market-rigging has a number of different symptoms, such as high prices for some generic pharmaceuticals, poor quality standards, dependence on foreign imports, and most significantly, shortages. Over the last 25 years, policymakers have allowed the monopolization of drug and medical supply purchasing, which makes it unprofitable to have a diverse and high-quality pharmaceutical production industry. In other words, China is threatening medical shortages that, ironically, we have already inflicted on ourselves.